Manufacturers in Nigeria have disclosed that President Muhammadu Buhari’s request for more loan to fund the 2020 budget is a serious source of concern.
Nigeria will service its debt with N2.45 trillion, a figure that is more than the 2.14 trillion earmarked for capital expenditure. This has drawn criticism from the Manufacturers Association of Nigeria (MAN) which questioned Nigeria’s capacity to service the debt.
Nairametrics had reported that Nigeria’s public debt stock rose to N25.7 trillion in June 2019. Consequently, the payment for servicing the debt has continued to be a major source of concern. Reports from the website of the Central Bank of Nigeria (CBN) confirmed that Nigeria spent a whopping $1.12 billion as external debt service payment between January and October 2019 (10 months).
According to the Director-General of MAN, Segun Ajayi-Kadir, in a report by Vanguard, the projects that the loans were used for are necessary, however, it doesn’t rule out cause for concern as Nigeria’s revenue-to-Gross Domestic Product (GDP) ratio remains low.
“In my opinion, the 39 emergency projects in the power, agriculture, transport & mining sectors of the Nigerian economy alluded to by Mr President should redress some of our infrastructure and sectoral performance/linkage deficits.
“To this extent, the projects are needful and their successful completion would boost the productive capacity of the Nigerian economy.
“However, the rising debt profile of Nigeria continues to be a cause for concern, especially the capacity of government to effectively service it and, at the same time, meet the bursting needs and aspiration of the citizenry going forward.
“Already, our budget projections for 2020 anticipates a debt service sum of 2.45trillion, an amount higher than the 2.14 trillion earmarked for capital expenditure.
“And even though our debt-to-Gross Domestic Product (GDP) ratio, which currently stands at 28 per cent, is still below the average in Africa, our revenue-to-GDP ratio remains low.”
Consolation from rising debt: Kadir said despite the concerns, the only comfort from the rising debt profile of Nigeria is that the government would focus the loan on increasing productivity and not consumption.
“A possible consolation remains that this loan is not programmed to fund consumption, but likely to improve our productivity, depending on its strategic allocation, the governance of project execution and monitoring and management of its foreseen impact on subsisting government inflows and financial commitments.”